What is a Consumer Proposal

A consumer proposal is one of the most common alternatives to filing for bankruptcy. A consumer proposal is designed for those who cannot afford to pay their debts in full but can afford to pay a portion of them. Essentially, a consumer proposal is a legislated way to make an offer to your creditors to reduce the amount of money that you owe. The idea is simple; we can calculate what you are worth to your creditors in a bankruptcy. Then in the proposal we offer them a better recovery than they would get in a bankruptcy, and we stretch the payments over time so that they can fit into your budget. The result is you can pay what you can afford, avoid a bankruptcy and your creditors are happier as they receive more money that they would have gotten otherwise. This whole process is done through the courts and managed by a licensed trustee, so that both you and your creditors are protected.

For residents of Edmonton who don’t want to file for bankruptcy this can be just the way to bring your debts down to a manageable level and avoid many of the negative consequences associated with filing a bankruptcy.

Here is an example of a consumer proposal:

Let’s assume that you owe a variety of unsecured creditors (credit cards, pay day loans, lines of credit, personal income tax etc.) and together they add up to a total of $45,000. If you tried to pay this off on your own:

On your own                         $ 1,061.93 per month for 60 months (5 years)

The problem is that you have cut everything you possibly can in your budget and the most you can afford to pay is $450.00 per month. This is where the consumer proposal comes in. It is very common to be able to get a proposal accepted for roughly a third of your total unsecured debt. So you could deal with these same debts in a consumer proposal and it would look like:

 Consumer Proposal            $ 250.00 per month for 60 months (5 years)

 The result is you are paying a total of $15,000, with no interest, over the same period of time and are able to save yourself a total of $811.93 each month and still deal with your debt.

If it sounds like a consumer proposal would help you to better manage your debts, you can contact me directly. For no cost we can sit down, we can evaluate your situation to help you determine if a proposal would work for you what you would have to offer to your creditors in a proposal and what you can expect the proposal process to look like.